Lads & Lassies (LL)
Week 4, Assignment 2
November 14th, 2012
Lads & Lassies
Classifying how the income statement needs to be coded for Lads & Lassies is a two step processes. I will be using the data provided in the case along with information from FASB's Accounting Standards Codification. FASB's coding system is being used to help prepare the layout and ensure proper reporting of the items listed in the case analysis. Some minor changes need to be done to the income statement format to make it presentable which will be noted in the analysis. Please reference Appendix A throughout the analysis to see how the income statement is ultimately being constructed. Analysis - 2005
When constructing the 2005 income statement for Lads & Lassies, I will be using a multi step income statement as this is the format that "includes other important revenue and expense classifications makes the income statement more useful" (Kieso, 2012). We have limited information to use for 2005, but we can still construct an income statement up to gross profit. We will adhere to FASB rule ASC 225-10-S99-2 (Regulation S-X Rule 5-03, Income Statements), which regulates the relevant items and their components which should be separately stated in the income statement and their arrangement for the presentation. This coding rule provides us the guidance on how to label and present the revenue generated by Lads & Lassies. Also included in this rule is the requirement on how to report costs and expenses associated with the applicable sales be reported separately on the income statement. Therefore we will breakout the expenses directly tied to sales on their own line item (Cost of Goods Sold). Lastly in 2005 we will calculate the gross profit, which "tells us how much money an entity would have earned if it
Lads & Lassies
didn’t pay any other expenses such as salary, income taxes,...